All Forum Posts by: Brian Eastman

@Paul Azad The specialty self-directed IRA custodians that have the training and capacity to deal with documenting an IRA's investment into alternative assets are not also brokerage firms. They are specialty trust companies and banks that make this service the core of their offering.

Separately, the mainstream brokerages have no interest in adding capacity for self-direction into alternative assets.  It is too complex for them.

So, the IRA that owns the LLC is not also a brokerage IRA.

@Mike Dymski Your IRA LLC can open one or more accounts with different financial institutions. You mentioned Schwab, so I went down a brokerage track with my prior response. There are limited options there.

The IRA-owned LLC can open an additional bank savings deposit. It needs to be a commercial account in the name of the LLC and associated with the LLC tax ID.

Some banks may balk when they see the owner of the LLC is an IRA. They are not trained, and it is not on their checklist, so you get what you get. Different bankers/branches at the same bank may react differently. So while you might walk into branch A and not get an account, branch B of the same bank might have someone who can put 2 and 2 together and it will be no problem.

Not all banks offer 5%+ rates for commercial accounts, but many do.  Shop around.

If you have more than one financial account titled to the LLC, you can move funds freely between them. The funds are staying within the envelope of the LLC, not leaving the IRA.

The provider who put your plan together should be able to assist with this type of conversation.

@mike 

@Mike Dymski NEVER move money from a checkbook IRA LLC directly to another retirement plan. Biggest mistake that people make. The LLC is the investment of your self-directed IRA, not the IRA itself.  You have effectively created an IRA inside of an IRA when you do this.  Try explaining that to the IRS.

Schwab will not open a trading account for your IRA-owned LLC, nor will most of the mainstream brokerages. They do not like being indirectly linked to an IRA they do not control. Tasty Trade will open an account for an IRA-owned LLC.

Alternately you can send money from your IRA-owned LLC to your self-directed custodian and then perform an IRA-to-IRA transfer to another IRA at any firm you choose.

@Kyle Kline

You cannot borrow from an IRA plan. It is possible to borrow from an employer plan like a 401(k).

Some people claim to "borrow" from an IRA by executing a 60-day rollover. You can take a distribution from an IRA, and so long as you return the funds to a qualified retirement plan within 60 days, the distribution is cancelled. If you miss the 60-day window, the funds are irrevocably treated as a distribution. This is allowed once per 12 months per taxpayer. I have seen more people torch their retirement plan using this "strategy" than I care to think about.

As @Chris Seveney notes, an IRA can be setup with a specialty self-directed custodian so the IRA can be invested in non-traditional assets like real estate. This is not a means for you to invest in real estate personally, and you cannot personally benefit such as by keeping the income yourself. Rather, your IRA can invest in real estate instead of being limited to investing in the stock market. If you think you can generate better performance for your IRA in real estate, this is something to explore.

@Devin Callon

Until last year, having checkbook IRA money in a non-interest bearing account was no big deal, because most savings rates were slightly better than nothing. We are in a window where idle capital is an opportunity cost, so seeking interest income until the rates change again makes sense.

The best place to start will be with your checkbook IRA provider. If you worked with a quality firm, they should be able to assist you with questions about the mechanics of moving funds around.

The bottom line is that if all accounts are held in the name of the LLC and associated with the LLC tax ID, they are interchangeable - kind of like different drawers in the same desk.

If the relationship with Stessa is in the name of the IRA owned LLC, you should be fine. You will, of course want to do some homework to identify the bank that Stessa is using and ensure they are FDIC insured and in good health.

@Gabe Bouldien

Yes, the money from the prior employer should be eligible for an in-service distribution, allowing a rollover to an IRA of your choosing. Check with your plan administrator for details.

@Gabe Bouldien

@Chris Seveney and @Doug Smith are mostly on target, but there may be a small window of opportunity.

Any contributions you make to a current employer plan will be locked into that plan.

You may, however, be eligible for an "in-service" distribution based on the language in your plan document.  Check with your HR department or plan administrator.

An in-service distribution allows you to rollover funds while still active within the plan, and will be condition based.

If you rolled any money into this plan from a prior employer plan, that can likely be distributed.

If you are over age 59 1/2, then you will be eligible to distribute funds.

Some plans (rare) may have other thresholds such as a number of years of service with the employer, an age like 50 or 55, etc.

@Jake Cyeed

A Solo 401(k) such as @Joe Homs has is a different form of retirement plan, designed for people who are self-employed and have no full-time employees in any business they control. The plan itself is a trust and there is no requirement for a 3rd party custodian as there is with an IRA. If you qualify, it is a nice option.

In the IRA format, you need to start with an IRA held by a non-traditional custodian, then have the IRA make a single investment into either an LLC or Trust to obtain checkbook control over the IRA.

There are a few firms that specialize in establishing a checkbook IRA trust.

If you are investing in non-liability risk assets like funds and syndications, there is a clear advantage to the trust as it is not considered a business and therefore not under the purview of the CA Franchise Tax Board.

If you will be investing in rental property, the limited liability protections offered by a LLC may outweigh the cost and headache of California filings. With the trust, the protections will not be as robust. Of course, quality landlord insurance is a useful risk mitigation strategy.

Which is best for you will depend on the nature and scale of investments you intend to make, as well as your risk tolerance.

Bottom line is to speak not only with a plan provider, but also with qualified tax or legal counsel.

@Karin Cornils

There are checkbook IRA options that use a trust instead of a LLC, which eliminates the CA franchise tax.

Partnerships are a complicating factor, however. You do not want to form a partnership trust, so each IRA would need a trust and they could then hold title as tenants in-common.

Setup properly from the get-go, it may have been a better solution. The one-time costs of trust formation would be offset by a more usable structure and reduced yearly IRA custody fees. Changing horses mid-stream is never optimal, however.

It would probably be cheaper and simpler to just get a property manager.

@Karin Cornils

I am not sure what you are seeking is available. The best place to start would be with your IRA custodian.

A checkbook IRA would eliminate this issue, and is generally a more effective and efficient tool for IRA investments into rental property. What is your resistance to that approach?